You’ve heard the phrase about a million times right before you swipe your card through those Point of Sale (POS) terminal at the grocery or department store. (By the way, why the crap can’t those things all work the same way? I have to guess the order of operation at each retailer. Do I swipe then press credit? Do I tell the clerk what I’m using first? Do I press cancel to use credit? You have two choices in this situation. (1) Ask the clerk, “what do I do?” and look like an idiot. (2) Take a guess, screw up the transaction, and get the eye-roll and sigh from the clerk and look like an idiot. Isn’t there some sort of POS terminal governing body?

But that’s not the point of this post. What I’m really asking is, do you use a debit card for most or all of your everyday purchases or do you charge everything on a rewards credit card? Me, I’m a debit card man. I’ve heard from readers and other PF bloggers that the credit card is definitely the way to go. I see a couple of reasons to go with both.

Credit Card vs Debit Card

Pro-debit:

Purchase comes out of your account immediately. This can be good and bad depending on how you look at it. Obviously you have a better idea of how much money you have in your account

Criteria Credit Card Companies Use To Approve You

if it comes right out. On the down side, you are losing the (admittedly miniscule) interest on that money.

It’s much harder to spend more money than you have.

Pro-credit:

You get the 20 days interest before the bill is due.

You get a complete list of all purchases made during the month in one place.

You get rewards (assuming you use a rewards card, and you should). (If you use my kick-ass bank, USAA, you get cash back for using your debit card!)

If you use Mastercard/VISA, you get certain insurance protections for buying stuff with their card.

Toss up:

Returns are the same for either.

Assuming your card is Mastercard/VISA branded, you get their liability protection for both types of cards.

You still have a fist full of receipts to do something with. (Five cent nickel has a good post asking how to deal with receipts. He’s also running a contest giving away some cool prices, so check it out)

When deciding credit card vs debit card for my next purchase, we use the debit card. I’d like to hear which method readers use and if I’ve missed any great reasons to do one of the other.

The Roth IRA has one distinct advantage over the newly-arrived Roth 401(k).

Here are the 401k Contribution Limits

With a Roth IRA, you can withdraw your initial investment fee- and tax-free at any time. Not so with the Roth 401(k). You can’t withdraw your contribution to a Roth 401(k) until you actually retire.

Should you want to withdraw your contribution from your Roth IRA, simply contact the financial services company where you invest and tell them what you want to do. They’ll be able to tell you the amount you’ve contributed if you don’t remember. Let them know your intentions and they can set the whole thing up. It’s very straightforward.

Now don’t get me wrong. I love the Roth 401(k) and invest a majority of my 401(k) contributions in it. With a Roth (either the 401(k) or IRA) you get your contribution and its gains tax-free at retirement. Pay no taxes on your retirement money – awfully sweet deal if you ask me.

Most people agree, which is why you’ll continually see the advice to fund a 401(k) to the employer match then switch to a Roth IRA. I don’t completely agree, though. I think the better technique is to fully fund your 401(k) then put money into a Roth IRA.

The reason is simplicity. If you have to take two actions every year – fund the Roth IRA and modify your 401(k) contribution somewhere during the year – it’s less likely you’ll actually do it.

So when comparing directly, the Roth IRA has the distinct advantage of your being able to get at your contribution before retirement. Though I don’t recommend raiding your IRA for spending money, a Roth IRA can function as a back-up emergency fund. There are different rules for withdrawing money before retirement from a traditional IRA.

When investors talk about diversification, they’re typically referring to diversification. But there’s another kind of diversification. It’s called tax diversification and you might be practicing it without knowing it.

Tax diversification is the idea that you should have investments subject to each of the various tax treatments. The idea applies not only to U.S. citizens, but those of other countries as well. There are three types of tax treatments for our purposes – tax-deferred, tax-free, and taxable.

The three account types

Tax-deferred. Tax-deferred accounts are those that grow tax free until they are liquidated, at which time full taxes are due. Examples are the 401(k) and traditional(”deductible”) IRA. You invest pre-tax dollars. The full amount of money goes to work for you, compounding until withdrawn. At the time of liquidation, the entire amount withdrawn is taxed as ordinary income.

Tax-free. Tax-free accounts use after-tax money to buy investments that then grow without ever being taxed again. Examples are the Roth 401(k) and Roth IRA and municipal bonds. In these types of account, you purchase the investment with after-tax income. The investment then grows over time. When liquidated, the total account balance is tax-free.

Taxable. These accounts invest after-tax income. When the investment is liquidated, the earnings are taxed again. An example is a regular brokerage account.

How tax diversification works
In short, you use tax diversification when you split your investable dollars between the three types of accounts. Tax rates and treatments are moving targets. By using tax diversification, you’re hedging.

Why use it?
You simply cannot know what the tax brackets will look like at retirement (unless you’re within a year of retirement, I suppose). Using this technique, you’re spreading the risk of using any one type of account.

For example, if the bulk of your retirement investments are in a combination of traditional IRA and 401(k), at retirement all of that money is fully taxable. As of today, it’s taxed as ordinary income. If your tax bracket is lower in retirement, you made a shrewd move. If it is instead higher, you lost money by using only the tax-deferred accounts. So whether you think Roths are bad or good, it makes sense to have at least a portion of your retirement savings there.

I personally use this technique in my investments. Currently, I have 8% pre-tax going to my traditional 401(k) and 11% going to a Roth 401(k). We also have a taxable account we fund each month.

I wasn’t going to ever write about credit card arbitrage, but a couple of fellow PF bloggers have had some experiences within the last week that I felt deserved comment.

First I read Q’s post at $1 Million to My Name about how he’s finally succumbed to the lure of 0% balance transfers. Credit card arbitrage, or 0% balance transfers, are a common way some personal finance-savvy people make a little ‘free’ money. Essentially, you apply for a 0% balance transfer credit card with a large credit limit, borrow the money, then deposit it into a high-interest savings account like INGDirect, Emigrant Direct, and so on. Depending on the amount you borrow, you can make several hundred dollars a month in interest.

I’ve not done this for one main reason – hassle. I don’t want to keep track of a bunch of credit cards I’ve borrowed against. I also don’t want to have to worry about making a mistake somewhere along the way that wipes out all the work doing this. Basically, doing this would complicate my life and I don’t think it’s worth it. The other (much less important to me) reason is that doing this seriously negatively affects your FICO score.

Which brings me to the second reason I finally wrote on the topic – doing credit card arbitrage could cost you in other ways.

Sun at Sun’s Financial Diary came across a Discover card that gives a balance transfer rate of 3.99% APR until 2020. He thinks if he were to apply for the card, his application may very well be denied because he currently plays credit card arbitrage. He’s got balances of $50,000 on various cards.

Something like this might save you much more money but you can’t take advantage of it because you’re in debt for a huge amount of money playing the 0% game. Or what if you suddenly need a car loan you didn’t anticipate? My wife had that experience when she got into a car accident and the insurance company declared her car a total loss.

Credit Cards are small plastic cards that can give you financial flexibility. There are different types of credit cards that are issued by financial companies. Examples of these are business credit cards, student credit cards, and secured credit cards, among others. But before somebody gets approved for a card, a series of background check is performed first. And all credit card companies, including those providing online credit cards, use them.

Credit Card Approval Criteria Used in Issuing a Credit Card

Creditworthiness.
Creditworthiness corresponds to a person’s good credit history. Creditworthiness also means that a person had good performance with his previous loans and was able to meet all his financial obligations with ease. Consequently, those with poor credit scores will experience difficulty in being approved for a credit card.

Job.
Credit card approval happens after a person can prove that he is financially stable. This also means that he has a good job, preferably from a reputable company. He should also be earning enough to pay up his credit card’s revolving balance.

Link to parents card.
This is especially true with student credit cards. College students certainly have the need for funds to be used as their living expenses during their stay inside university dormitories. Even if students don’t have a steady job yet, they are approved for a credit card for as long as it is applied under their parent’s name.

Verifiability.
This means that the personal data of a person, which includes but is not limited to, his residential and business address, social security number, contact numbers, and credit history, are correct and conformable. This gives financial institutions the ease of getting in touch with the credit card holder should problems arise.

How a Credit Card Should Be Used

Always pay your bill on time.
If you fail to pay your bill on time, you will be charged a late payment fee. And these fees could really come high. Most credit cards companies charge as much as $30 if you miss your deadline or if you can’t pay the minimum amount required at least. Not only that these charges add to your expenses. It will also cause a dent on your credit history.

Try to pay your credit card bills in full.
If you always pay in full, you will actually make a credit card company pay you back for using their card instead of the other way around. On the other hand, if you choose to pay only the minimum amount every time, it would take you several years before you can fully pay your debt.

If you have overwhelming credit, unmistakably you are subjected to ignominy. The creditors will often mince disparaging words. But you can put things back to the system if you have at least an iota of hope.. Here are the top tips to help you overcome the bad credit menace. Read more. The article covers

Tips on How to Repair Bad Credit

Check your credit report regularly

Review the Best Free Self Credit Repair Services

There are experts you can get to teach you how to repair bad credit, in addition to numerous numbers of companies and books available. But reality demands that you collect information from sources such as a credit repair guide or bad credit free repair organizations etc. This takes a lot of patience. But mind you, no effort is bigger than the ignominy you are subjected to because of bad credit. Here are a few practical tips on how to repair bad credit on your own.

There are thousands of Americans who want to repair bad credit problems and their raise their credit scores to respectable levels once again. The following tips have in general worked for many and adopting them to your condition can make them work for you too.

Check your credit report regularly

Obtain your credit report and study that carefully looking for discrepancies. What with credit bureaus receiving tens of thousands of dispute letters in addition to their original work, mistakes are bound to creep into credit reports easily. Dispute them in writing with all supporting documents enclosed, to prove your point. Credit bureaus have 30 days to investigate and correct the mistakes if they found them right. Thus your credit score is restored and this is reflected in your new credit report. You are entitled for a free report every year. Obtain reports regularly and keep a tab on it. There can be trivial mistakes like your name, address or credit collection reports etc.

Prevent further decline

One way to prevent further deterioration of your credit report is to stop charging your card when you are unable to pay them. Don’t close any accounts in a hurry as this will send bad signals to creditors and credit bureaus. So try and improve on your payment history. You can manage this by:

Pay bills regularly

Paying bills regularly and on time prevents plummeting of your credit score. Secondly making current the missed out payments is crucial and it is picked up as a strong point of recovery.

See creditors in person

Talk to your creditors in person and try to explain that things have gone bad and try and work out a new payment plan. There are not in the business to take their pound of flesh in your distress. If they did, they are the losers. There is affair chance of them accepting your practical proposal, but just stick to what you can actually be able to pay each month rather than fallacy. This is a slow but steady step in the direction of bad credit report repair.

Everyone pays attention to the interest rate when shopping around for credit cards, but Finance Charge policies are rarely glanced at. Are credit card company’s are really charging you 83.3% interest? The normal credit card APR ranges from 12%-29%. When a customer receives a $1000 loan from a bank, the bank in turn has the legal right to charge interest on the rate you borrowed the loan. If, for example, the interest rate were a fixed 10%, cost of borrowing the original $1000 would be at least $1100, in other words, the $1000 loan + $100 finance charge. Banks and credit card companies don’t expect most customers to borrow the loan and pay it back right away, and nor do most people pay on time every month. The bank allows customers a few days after that date to pay their bill, which is called a grace period. Payments received after the grace period can be assessed as late fees or additional finance charges stated by the federal Truth-in-Lending Act. Learning how to increase your credit score will help you get lower rates.

What Can You Do?

Don’t accept it!

You can phone into your credit card company and ask for them to lower your rate, or your finance charges to be minimized. The key to getting compliance with your credit card companies is to go in with a plan before asking. If you have a poor payment method, chances are very slim that you will get your rate lowered, or any additional favors added into that mix. BUT, if you do make your payments on time, that is a huge card you can play. You have to think of a plan before phoning. Think of your conversation as a give and take.

“I have made my payments on time for the last year, and I am hoping to pay off my credit card in the next 8 months, can you do better on the interest rate? ”

The bank is going to give up a lot of money of interest and finance charges they would otherwise make off of you, so why would they lower your rate?

Most often, it involves a promise to make a certain amount of payments of some sort of give on your end. We have an additional article that explains how to phone in and lower your credit cards here. The # 1 success tip is to think in advance what positives you have on your side. What cards do you hold in your hand? Do you have a job that is consistent? Have you paid on time? Are you eager to make your payments on time? Are you excited about paying off your credit card?

Read More About The Disadvantages Of Credit Cards

When we phoned in to our credit card companies asking for a low rate we had success and failure. One credit card gave us 0% interest for one whole year. We were jumping up and down after that phone call, while the other card, flat out said NO, after talking to a number of representatives. We decided to move our credit card balance to another card, because some companies will refuse to work with customers who are willing to pay off their debt. Keep in mind, we did pay on time the entire time we had our card. Some companies JUST will refuse to take a loss on their bottom line of making money.

The last card, we had to wait on hold on the phone for the manager as the customer representative declined to lower our rate. One big tip we can pass on is don’t give up on the phone. Many people are phoning in and asking for a lower rate, so their customer reps are educated to decline customers. Most customers think, no means no, so they give up and hang up. Ask to speak to the manager in charge. If you do so, be sure to have a plan that details why they should give it to you, and what you will promise in return for a lower rate.

Life after debt… What should you do once you get out of debt? The truth is that many people resume old financial habits after they successfully get out of debt. That would be bad enough during normal times, but considering the fact the we are headed for another Great Depression, it is imperative to fundamentally change how you manage and spend your money after you do get out of debt.

So what should your financial priorities be in 2018?

Well, “Dr. Doom” Marc Faber, who predicted the 1987 stock market crash, is warning that some incredibly difficult economic times are coming and he is advising investors to buy farmland and gold.

Why?

Well, because in the hard times ahead, food will be an incredibly valuable resource. Owning farmland will put you in a very good position whether you wish to grow your own food or sell food to others.

In addition, gold is a great way to preserve your wealth. The reality is that an ounce of gold could buy an expensive suit 100 years ago and an ounce of gold can buy an expensive suit today. But the purchasing power of U.S. dollars has declined by over 95 percent during that same time frame, and the value of the dollar is about to go down dramatically once again.

If you don’t have enough money to invest in gold, then what you need to do is focus on the things that will be necessities during an economic meltdown….

1) Food

2) Water

3) Shelter

4) Energy

5) Security

The reality is that most Americans live month to month and they have very little stored up in case an emergency strikes.

Don’t let that happen to you and your family.

Turn your full attention to preparing for the incredibly hard economic times that are coming for your life after death.

Credit cards can really be your savior in particular on occasions that you don’t have enough cash inside your pockets to buy an item that is badly required. It can give you the possibility of shopping for a range of items, supplies, services and properties without having to pay for them at once. On the other hand the disadvantages of credit cards can go ignored in the short run, but in the long run it’ll catch up with you.

Disadvantages of Obtaining A Bank Credit Card

Given that credit cards are formed beneath certain terms and agreements that are laid out by their banks, it suggests that whatever non-fulfillment of such may perhaps entail you for consequences. One of the most frequent consequence is having a greater price of payment in particular in the event you usually do not pay around the specified time that the bank expected you to. Additionally, when you are late on your normal payments, it can bring about you to possess negative credit rating which in turn can cause reduced creditworthiness in the future. This suggests that in any occasion that you simply want to open an additional credit account, or probably problem a private loan from a different bank; it might provide you with a reduce credit line. Due to the fact you currently have a negative credit history along with your existing bank, then it might naturally imply that you just do not have the correct sources to fund an additional account, and therefore all your bank applications rejected.

The Disadvantages Of Credit Cards: Overspending Tendencies

Aside from these, due to the fact having a bank card implies that you could purchase definitely anything anywhere, it can result in overspending. It may trigger you to possess plenty of debt inside the future; a debt that may be merely too high priced for you to handle. Given that obtaining a credit card provides you financial freedom to get, it might lead you to be too impulsive and impractical in the things that you just obtain. You then obtain on fancy as an alternative on necessity.

The Need For Budgeting

Getting a huge debt is especially difficult should you are certainly not efficient in regulating your finances or your resources. Exactly the same goes in the event you aren’t giving a specific percentage of the revenue to cover for the debt payments. In circumstances like this, it might offer you critical challenges in the future and points may possibly even attain a legal process whenever you are still incapable of paying off your credit debt.

Confusing Terms And Circumstances

Moreover, credit cards have complex terms and conditions that at instances even the borrower himself will not recognize totally. At times these complications bring about the borrower assuming the wrong issues and thus, making use of the credit card the wrong way. Also often the borrower will not be completely certain in the uses for the different amounts that he’s paying for, for instance more fees like interest rates, service fees and such.

Clearly, to possess credit is indeed an excellent point particularly for those who don’t desire to bring with you a lot of cash constantly. However, it really is such a massive responsibility to personal a credit card that it can be essential that you just your self will have to first recognize the limits that it supplies you. In order for the credit card to assist you within your finances instead of burying you within a enormous debt, you must make sure that you might be totally capable of regulating oneself as to which things are important and that are not just before obtaining such products within the industry.

So how to pay off debt with no extra money? Well, one of the most important ways to learn how to manage your debt is to learn how to cut down on your spending. This allows you to free up extra money that you can then use for other uses, such as paying down your debt as well as emergency expenses so that you do not find yourself in a situation where you need to incur additional debt.

This means that it is important to target wasteful spending and learn how to eliminate. Many people when first presented with this idea believe they have very little wasteful spending; however, when they actually sit down and analyze their spending habits they realize there is actually quite a few unnecessary expenses they could live without. At this same time it is also imperative that you learn how to stay within a specified budget in order to learn how to curb spending. Below are some tips to help you learn how to cut back on spending and reduce bills.

Evaluate your spending habits

First, it’s imperative that you look for the places where you can save small portions rather than looking for big bucks spending. This is usually where most of your wasteful spending actually goes. These areas are also the easiest to cut down on. Consider how many take-out coffees your purchase in a day or a week as well as colas and other beverages. If you feel that you absolutely cannot live without you espresso or cappuccino then buy yourself a cheap appliance and start making them at home. While this will mean an initial expenditure you’ll save a chunk each week because you’ll no longer need to make extraneous purchases.

Make a point to start targeting and shopping sales. Resist the temptation to buy something if it’s not on sale or you don’t have a coupon. You just might be amazed at how much money you can save on practically everything by simply grabbing the scissors and Sunday newspaper. Small things can quickly add up in the effort to pay off your debt.

Make an effort to cut down on your utility bills by conserving energy. Be sure to keep your drapes and blinds closed to reduce cooling costs. In the winter bundle up so you don’t have to run the heat as much. If possible, use a clothesline to eliminate or reduce the need for the dryer.

Consider how much money you may be paying others for chores you can easily do yourself.

Cut down or eliminate luxury costs such as subscription satellite or cable channels.

Conclusion of paying down your debt

Hopefully this article on how to pay off debt with no extra money has helped you come up with some new ideas to getting rid of that debt. While the small costs can certainly add up it is also important to consider whether there are any larger costs you can eliminate as well. Consider whether it would be possible to trade in your car for something that would be cheaper and possibly better on gas and maybe any insurance costs as well.

Look into refinancing your mortgage, if you own a home. If rates are currently low you can really get a lot of bang for your buck.